Page 130 - Invited Paper Session (IPS) - Volume 2

IPS188 Bruno Tissot
services consumed by an average consumer, ie the CPI index. However,
inflation will be perceived differently by other types of agents, for instance by
producers, exporters or importers, or even within these groups themselves –
say, between wealthy and poor consumers; but this type of distribution
information is generally missing in the SNA framework (Tissot (2018)).
Moreover, one could be more interested in the evolution of some sub-
components of inflation – for instance in “core” inflation, which corrects for
the volatility caused by movements in food and energy prices to reveal
underlying inflation trends. The situation in the United States illustrates this
variety of measures in the case of consumer inflation: the Bureau of Labour
Statistics (BLS) produces monthly data on changes in the prices paid by urban
consumers for a representative basket of goods and services, with separate
indexes for two groups: all urban consumers (CPI-U), which is the index most
often reported; and the urban wage earners and clerical workers (CPI-W),
which is used more for wage negotiations (BLS (2019)). Several additional
indicators are compiled, such as: the BLS chained CPI (designed as a "costof-
living" index); the Personal Consumption Expenditures (PCE) price index
developed by the Bureau of Economic Analysis in consistency with the SNA
framework; the core PCE; etc.
Fourth, an important factor driving price and wage developments relates
to expectations. To address this point, many countries have set up a number
of surveys to help predict short-term developments in inflation – eg in the
context of the work organised since 1953 under the umbrella of the Centre for
International Research on Economic Tendency Surveys (CIRET), a global forum
for institutions conducting business and/or consumer surveys. Such surveys
comprise the well-known US consumer survey by the University of Michigan
(Curtin (1996)), the business and consumer surveys conducted under the aegis
of the European Commission in Europe (European Commission (2019)), and
the consensus forecasts collected from various economists and forecasters –
cf for instance the short- and long-term inflation forecasts of the US Survey of
Professional Forecasters published by the Federal Reserve Bank of Philadelphia
(Croushore (1993)) as well as the similar survey set up by the ECB (Garcia
(2003)). Yet how useful such measures of inflation expectations can be to help
predict actual inflation numbers is an open issue, as suggested by Graph 2 for
the Euro Area and the United States.
Fifth, inflation is a general concept that is not limited to traded goods and
services. One important area relates to asset prices, which can play a powerful
role as was seen during the Great Financial Crisis of 2007-09, with the strong
impact of the ups and downs observed in housing prices (Tissot (2014)). In
addition, developments in financial prices can also be useful to measure
inflation expectations based on market-based indicators (eg index-linked
bonds).

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